AI-Driven Optical Demand Tightens Indium Phosphide Supply and Lifts Lianya Shares
Table of Contents
You might want to know
- Why is demand for indium phosphide (InP) substrates rising alongside AI server growth?
- How are manufacturers responding to shortages that are affecting production and shipments?
Main Topic
Rapid growth in artificial intelligence infrastructure is increasing demand for high-speed optical communications equipment. AI servers rely on faster connections to move large volumes of data, supporting demand for optical transceivers operating at 800G and 1.6T. This trend is also drawing attention to the upstream materials needed to manufacture optical components, particularly indium phosphide (InP) substrates and epitaxial wafers.
Lianya (聯亞, 3081-TW), a manufacturer of compound-semiconductor epitaxial materials, saw its shares open higher and continue climbing on the 27th. Despite four consecutive sessions of foreign investor net selling in the previous week, the stock rose as much as 9.47% intraday, reaching NT$2,600. The move took place amid strong investor interest in optical communications suppliers and expectations that AI-related demand will continue to influence the sector.
Market participants say that demand connected with optical communications and co-packaged optics (CPO) is contributing to a shortage of InP, a key material used in parts of the optical supply chain. InP substrates are used to produce epitaxial structures and components that support optical transmission. When upstream materials are scarce, manufacturers may be unable to increase output quickly enough to match customers’ orders, even when demand is robust.
Industry sources describe the shortage as affecting InP-focused optical communications companies, including Global Communication Semiconductor (全新, 2455-TW) and Lianya. Capacity is reported to remain well below order requirements, while prices for InP substrates and epitaxial products continue to rise. Estimates indicate that the current shortfall in InP substrates and epitaxial materials is still above 30%. This imbalance highlights a central challenge for the industry: demand can expand faster than the specialized production capacity and material supply needed to serve it.
The supply gap is not simply a question of orders; the immediate constraint is whether manufacturers can secure enough substrates and epitaxial materials to produce and ship components. That distinction matters because companies may have strong customer interest and substantial order visibility, yet still be unable to convert demand into shipments or revenue at the pace they would otherwise achieve.
Lianya reported consolidated revenue of NT$3.687 billion for the first three quarters of 2026, an increase of 136.33% year over year. At a previous investor conference, the company said that increasing shipments of silicon photonics products were contributing to business growth. Its 1.6T products have entered mass production, while development of 3.2T products is continuing through discussions with customers. These product developments position the company to participate in demand for higher-speed optical links, although the extent to which output can grow remains connected to supply availability.
The company is preparing to expand production capacity in response to increased optical communications demand. At the end of August this year, Lianya’s board approved an equipment investment of no more than NT$2.27 billion. The investment is intended to support manufacturing readiness as customer requirements grow. Capacity expansion can help address production constraints, but equipment projects do not immediately eliminate shortages: installation, qualification, yield improvement, and access to raw materials all affect how quickly additional capacity becomes productive.
Lianya has also signed long-term InP substrate procurement agreements with suppliers in the United States and Japan. Such contracts can help establish a more predictable supply base and provide suppliers with clearer demand signals. They are one way for manufacturers to reduce exposure to short-term availability fluctuations. However, a procurement agreement does not, by itself, guarantee that the market can supply all of the material required; broader production capacity and manufacturing yields remain important factors.
Global Communication Semiconductor has also described the scale of demand associated with AI data centers (AIDC). The company said that AIDC demand is still growing explosively, but that it is encountering shortages of both InP substrates and epitaxial materials. It characterized the principal difficulty not as insufficient orders, but as a lack of materials available to manufacture products and ship them to customers. This account reinforces the view that supply constraints, rather than weak customer demand, are currently limiting the pace of deliveries for some manufacturers.
Foreign investors have identified InP substrates and continuous-wave (CW) lasers among the most important components and inputs for optical communications. If substrate supply increases, or manufacturers improve production yields, pressure across the supply chain could ease. Higher yields would allow more usable material or components to be produced from existing capacity, while greater substrate availability could enable downstream manufacturers to increase output. Both paths depend on technical execution and the availability of specialized production resources.
The market implications therefore involve more than a single company’s share-price movement. The shortage affects the relationship between demand, capacity, and deliverable products across multiple stages of the supply chain. Companies with strong customer demand may benefit when they can secure materials and scale production, but supply limitations can delay shipments and complicate the timing of growth. Investment in equipment and long-term sourcing may strengthen readiness, while the pace of industry-wide improvement will depend on substrate production and yield performance.
For investors and industry observers, the reported figures provide several points to monitor: the above-30% estimated material shortfall, growth in Lianya’s revenue, the progress of its 1.6T mass production and 3.2T development, and the effect of its equipment investment and supplier agreements. These indicators do not remove uncertainty, but together they help explain why strong demand can coexist with constrained production and why supply-chain developments may remain central to the sector’s outlook.
Key Insights Table
| Aspect | Description |
|---|---|
| AI-related demand | AI servers are supporting demand for 800G and 1.6T optical transceivers and associated optical communications products. |
| InP supply constraint | The estimated shortfall in InP substrates and epitaxial materials remains above 30%, limiting manufacturers’ ability to meet orders. |
| Lianya financial performance | Lianya reported consolidated revenue of NT$3.687 billion for the first three quarters of 2026, up 136.33% year over year. |
| Product roadmap | Lianya said its 1.6T products have entered mass production and that it is developing 3.2T products with customers. |
| Capacity and sourcing | Lianya’s board approved equipment investment of no more than NT$2.27 billion, and the company signed long-term InP substrate procurement agreements with suppliers in the United States and Japan. |
| Share-price movement | On the 27th, Lianya shares rose as much as 9.47% intraday and reached NT$2,600, despite four consecutive sessions of foreign investor net selling in the prior week. |
| Potential relief measures | More substrate supply and improved production yields could help reduce pressure across the optical communications supply chain. |
Afterwards...
The ongoing shortage points to several areas where further technological and industrial progress could have broad effects. Increasing the capacity to manufacture InP substrates is one priority, but additional output must also meet the quality and consistency requirements of downstream optical-component production. Research into process control, equipment productivity, and yield improvement could therefore complement investments in physical capacity.
Another area to explore is coordination across the supply chain. Longer-term procurement arrangements can improve planning between material suppliers and manufacturers, while clearer demand forecasts may help align investment decisions. Better visibility into production constraints could also help companies identify whether bottlenecks are concentrated in substrate growth, epitaxial processing, component fabrication, or qualification for customer applications.
At the product level, the transition to higher-speed optical systems, including 1.6T and emerging 3.2T development, will require continued work on performance, reliability, and manufacturability. CPO and other optical integration approaches may influence how future systems are designed, but their impact will depend on engineering progress and adoption across the broader ecosystem. The most useful long-term measure of progress will be whether innovation can translate into reliable, scalable shipments—not demand forecasts alone.
As AI data centers expand, the balance between rapidly growing demand and specialized material supply is likely to remain an important subject for industry analysis. Continued exploration of substrate production, manufacturing yields, optical integration, and supply-chain resilience can help clarify how quickly the sector may respond to customer needs and what constraints could shape its next stage of development.
Last edited at：2026/10/27